California Supreme Court issues key arbitration decision

The California Supreme Court has issued a long-awaited decision in an important arbitration case. The decision is generally good news for employers seeking to use class-action arbitration waivers to deter wage-and-hour class actions. It’s less helpful to those attempting to fight off wage-and-hour “representative” actions.

Recent case: A driver for CLS Trans­­por­­ta­­tion sought to bring a class-action lawsuit on behalf of himself and other employees. The allegation: that CLS failed to properly pay for overtime hours and meal and rest periods, and that it violated wage-statement and waiting-time pay requirements.

The driver had entered into an arbitration agreement that waived the right to file class-action lawsuits. The agreement stated that “any and all claims” arising out of his em­­ploy­­ment were to be submitted to binding arbitration before a neutral arbitrator. The agreement also provided for reasonable discovery, a written award and judicial review of the award. Costs unique to arbitration, such as the arbitrator’s fee, were to be paid by the employer. The arbitration agreement contained class- and representative-action waivers.

The employee also sought to bring a “representative action” under the Labor Code Private Attorneys Gen­­eral Act of 2004 (PAGA), which allows an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with 75% of the proceeds of that litigation going to the state.

The California Supreme Court concluded the class-action waiver was valid, but an arbitration agreement requiring an employee, as a condition of employment, to give up the right to bring representative PAGA actions in any forum is contrary to public policy. (Iskanian v. CLS Transportation Los Angeles, LLC, S204032, California Supreme Court, 2014)

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